Aurora Investment Trust : Annual Financial Report for the year ended 31 December 2023

Aurora Investment Trust plc Annual Report 31 December 2023

Company No. 03300814

Contents 1

Contents

Strategic Report

Financial and Performance Highlights 3

Chair's Statement 4

Investment Policy and Results 7

Top Holdings 11

Portfolio Analysis 12

Statement from the CIO of the Investment Manager 13

Investment Management Review and Outlook 14

Phoenix UK Fund Track Record 22

Report under Section 172 of the Companies Act 2006 24

Other Strategic Report Information 28

Governance

Directors, Investment Manager and Advisers 33

Directors' Report 36

Corporate Governance Statement 43

Directors' Remuneration Report 51

Statement of Directors' Responsibilities 56

Audit Committee Report 58

Independent Auditor's Report 62

Financial Statements

Income Statement 71

Statement of Financial Position 72

Statement of Changes in Equity 73

Cash Flow Statement 75

Notes to the Financial Statements 76

Alternative Performance Measures 95

Glossary 97

Notice of Meeting 99

Strategic Report

Strategic Report

Financial and Performance Highlights

Performance

Objective

To provide shareholders with long-term returns through capital and income growth by investing predominantly in a portfolio of UK listed companies.

Policy

Phoenix Asset Management Partners Limited ("Phoenix") was appointed as Investment Manager on 28 January 2016. Phoenix seeks to achieve the Company's Objective by investing, primarily, in a portfolio of UK listed equities.

The portfolio will remain relatively concentrated. The exact number of individual holdings will vary over time but typically the portfolio will consist of 15 to 20 holdings.

The Investment Policy of the Company can be found on page 7.

Performance is benchmarked against the FTSE All-Share Index (total return), representing the overall UK market.

BenchmarkDividend

The Board proposes to pay a final dividend of 3.45p per ordinary share (2022: 2.97p) to be paid on 20 June 2024 to shareholders who appear on the register as at 10 May 2024, with an ex-dividend date of 9 May 2024.

Annual General Meeting ("AGM")

The AGM of the Company will be held at 25 Southampton Buildings, London WC2A 1AL on 12 June 2024 at 1 p.m. There will be no Investment Manager presentation at the AGM. Instead, there will be a separate Investment Manager presentation and Q&A event at 3.30 p.m. on 9 October 2024 at the Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London SW1P 3EE.

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Jan-2016

Jan-2017

Jan-2018

FTSE All-Share Index

Jan-2019

Jan-2020

Jan-2021

Aurora Net asset value (NAV) per Ordinary Share

Jan-2022

Jan-2023

Dec-2023

The chart above shows the Company's NAV performance (total return) compared to the FTSE All-Share Index (total return) since Phoenix became the Investment Manager.

StrategicReport

Chair's Statement

Lucy Walker Chair

26 March 2024

I am pleased to present the Aurora Investment Trust PLC annual report for the year ended 31 December 2023.

Performance

Performance for the year to 31 December 2023 was very positive, with a Net Asset Value (NAV) per share total return* of 36.3% (2022: -19.1%). The share price total return* was 28.5% (2022: -16.3%) compared to the Company's benchmark FTSE All Share Index total return of 7.9% (2022: 0.3%).

The portfolio saw strong performance across the board with no notable detractors in the major holdings above a 3% weight. Top contributors were Barratt Developments which contributed 6.9% (+53% in the year), Frasers Group which contributed 6% (+29% in the year) and Hotel Chocolat which contributed 4% (after a bid by Mars at 175% premium).

Hotel Chocolat is a useful illustration of Phoenix's philosophy. They devote their attention to understanding a small number of businesses in depth and are patient waiting for them to reach the right price. In the case of Hotel Chocolat, they had monitored the business since its IPO in 2016 and only in 2022 did it reach a price which allowed Phoenix to invest. In late 2023 it was acquired by Mars at a price slightly higher than the intrinsic value estimated by Phoenix.

For further details on the portfolio and performance, see the Investment Manager's Review by Phoenix on pages 14 to 21.

The Investment Manager and Performance Fees

2023 was the eighth year of Phoenix's management of the Company's portfolio, since they took over in January 2016. Throughout that time, Phoenix has employed a focused and patient investment approach.

Phoenix uniquely receives no annual management fee. Instead, they are solely remunerated from an annual performance fee, equal to one third of any outperformance of the Company's NAV against its benchmark, the FTSE All Share Index (total return).

The performance fee is paid by issuance of the Company's ordinary shares, which are subject to a fixed three-year clawback period. That means issued shares will be returned by the Investment Manager in the event any outperformance versus the index reverses on the third-year anniversary. If outperformance fully reverses, the Investment Manager receives nothing.

In the years ending 2019, 2020 and 2021 the Investment Manager was awarded shares in settlement of performance fees earned. The shares awarded for 2019 performance were clawed back in 2022, with 530,311 shares returned to the Company and cancelled. Following strong performance in 2023, the shares awarded for the 2020 performance were retained, with Phoenix earning a performance fee of £560,903 for 2022 and 2023. In accordance with the Investment Management Agreement, 80% of this fee was settled in January 2024 with 172,373 shares issued to Phoenix at 260.32p each, which was the prevailing published NAV per share at the time of issue. The remaining 20% will be settled following publication of this annual report.

*Alternative Performance Measure (see page 96).

Chair's Statement

Following this share issue, the Company's issued share capital is now 76,250,833 ordinary shares of 25p, each carrying one voting right. The Company does not hold any shares in Treasury.

Continued

Share Price Discount

The Board closely monitors the discount at which the Company's shares trade to NAV. During 2023 the discount widened from 4.4% at the end of 2022 to 10.0% at the end of 2023.

Closing the discount remains a key objective of the Board and marketing activities are considered a key part of the strategy for achieving this. Phoenix along with Liberum, the Company's broker, and Frostrow Capital as investor relations and marketing adviser continue to promote the Company proactively.

The Board is seeking to renew the power granted to it by shareholders to buy back shares at the forthcoming annual general meeting. The Board will also seek to renew its powers to issue new shares in order to be able to issue shares to investors should the shares return to a premium, as well as to enable the issue of shares to the Investment Manager in respect of performance fees earned.

Growth of the Company

Another key objective of the Board is growing the Company, with a medium-term target of £250 million. During the year the Company's market capitalisation increased from £149 million at 31 December 2022, to £188 million at 31 December 2023. Central to growing the Company to our target will be closing the discount, so this is the Board's first priority.

Annual General Meeting ("AGM") and separate Investment Manager presentation event

This year's AGM will be held at the Company's registered office, 25 Southampton Buildings, London WC2A 1AL, on 12 June 2024 at 1 p.m. to consider the business set out in the Notice of Meeting on pages 100 and 101 and, like last year, will not include an Investment Manager presentation. Last year the Board decided to hold a separate event in October instead of combining an Investment Manager presentation with the AGM. This presentation was well attended and the Board has decided to follow the same formula this year. Accordingly, a separate Investment Manager presentation event will be held at 3.30 p.m. on 9 October 2024 at the Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London SW1P 3EE. This event is intended to be of interest to both existing and prospective Aurora shareholders and will include multiple speakers from the Investment Manager. It is intended for this event to be recorded and made available afterwards on the Company's website.

With respect to the AGM, the Board strongly encourages shareholders to register their votes online in advance of the meeting by visitingwww.signalshares.comand following the instructions on the site. Appointing a proxy online will not restrict shareholders from attending the meeting in person should they wish to do so and will ensure their votes are counted if they are not able to attend. Shareholders are invited to send any questions they may have to the Company Secretary by email [e-mail] of the meeting.

Chair's Statement

Dividend

Continued

The Board is recommending a final dividend of 3.45p (2022: 2.97p) per ordinary share, to be paid on 20 June 2024 to shareholders who appear on the register as at 10 May 2024. The ex-dividend date is 9 May 2024. This dividend will be proposed at the forthcoming AGM to be held on 12 June 2024. The Company's dividend policy, which is to distribute substantially all net revenue proceeds, remains unchanged and can be found on page 7 of this Annual Report.

Outlook

2023's performance was very welcome, but there remains significant value in the portfolio, with Phoenix estimating a discount to intrinsic value of 130%. The Company's shares, particularly trading on close to a 10% discount to NAV, offer an excellent opportunity to access Phoenix's differentiated strategy of investing in a concentrated portfolio of great, thoroughly researched businesses at attractive prices.

Lucy Walker Chair

26 March 2024

Investment policy and results

The Company seeks to achieve its investment objective by investing predominantly in a portfolio of UK listed companies. The Company may from time to time also invest in companies listed outside the UK and unlisted securities. The investment policy is subject to the following restrictions, all of which are at the time of investment:

• • The maximum permitted investment in companies listed outside the UK at cost price is 20% of the Company's gross assets;

• • The maximum permitted investment in unlisted securities at cost price is 10% of the Company's gross assets;

• • There are no pre-defined maximum or minimum sector exposure levels but these sector exposures are reported to and monitored by the Board in order to ensure that adequate diversification is achieved;

• • The Company's policy is not to invest more than 15% of its gross assets in any one underlying issuer (measured at the time of investment) including in respect of any indirect exposure through Castelnau Group Limited ("Castelnau");

• • The Company may from time to time invest in other UK listed investment companies, but the Company will not invest more than 10% in aggregate of the gross assets of the Company in other listed closed-ended investment funds; and

• • Save for Castelnau Group Limited, the Company will not invest in any other fund managed by the Investment Manager.

While there is a comparable index for the purposes of measuring performance over material periods, no attention is paid to the composition of this index when constructing the portfolio and the composition of the portfolio is likely to vary substantially from that of the index. The portfolio will be relatively concentrated. The exact number of individual holdings will vary over time but typically the portfolio will consist of holdings in 15 to 20 companies. The Company may use derivatives and similar instruments for the purposes of capital preservation.

The Company does not currently intend to use gearing. However, if the Board did decide to utilise gearing the aggregate borrowings of the company would be restricted to 30% of the aggregate of the paid-up nominal capital plus the capital and revenue reserves.

Any material change to the investment policy of the Company will only be made with the approval of shareholders at a general meeting. In the event of a breach of the Company's investment policy, the Directors will announce through a Regulatory Information Service the actions which will be taken to rectify the breach.

Dividend Policy

The Company does not have a fixed dividend policy. However, the Board expects to distribute substantially all of the net revenue arising from the investment portfolio. Accordingly, the Company is expected to pay an annual dividend that may vary each year.

Borrowing Policy

The Company is not prohibited from incurring borrowings for working capital purposes, however the Board has no current intention to utilise borrowings. Whilst the use of borrowings should enhance the total return on the ordinary shares where the return on the Company's underlying assets is rising and exceeds the cost of borrowing, it will

Investment policy and results

have the opposite effect where the underlying return is falling, further reducing the total return on the ordinary shares. As a result, the use of borrowings by the Company may increase the volatility of the NAV per share.

The Company has a policy not to invest more than 10% of its gross assets in other UK listed investment companies. As a consequence of its investments, the Company may therefore itself be indirectly exposed to gearing through the borrowings from time to time of these underlying investment companies.

Continued

Purpose and Key Performance Indicators ("KPI's")

The Company's purpose is encapsulated in its investment objective, which is to provide shareholders with long-term returns through capital and income growth by investing predominantly in a portfolio of UK listed companies. The Board measures the Company's success in attaining its objective by reference to KPIs as follows:

a. To make an absolute total return for shareholders on a long-term basis; b. To make a relative total return for shareholders on a long-term basis, as measured against the Company's benchmark, the FTSE All-Share Index (total return);

• c. The Board seeks to ensure that the operating expenses of running the Company as a proportion of NAV (the Ongoing Charges Ratio) are kept to a minimum; and

• d. The discount/premium to NAV per share at which the Company's shares trade is also closely monitored in view of its effect on shareholder returns.

These are alternative performance measures ("APMs"). The Financial Statements (on pages 71 to 94) set out the required statutory reporting measures of the Company's financial performance. However, the Board additionally assesses the Company's performance against these APMs, which are viewed as being particularly relevant for the Company. These APMs are widely used in reporting within the investment company sector and the Directors believe they enhance the comparability of information and assist investors in understanding the Company's performance. Further information on each of the KPI's is set out below. Definitions of the APMs and the basis of their calculation are set out on pages 95 and 96.

The Chair's Statement on pages 4 to 6 incorporates a review of the highlights during the year.

The Investment Management Review and Outlook on pages 14 to 21 gives details on investments made during the year and how performance has been achieved.

Performance (KPIs a and b)

The Company's performance in absolute terms and relative to the FTSE All-Share Index (total return) benchmark since Phoenix was appointed as Investment Manager in 2016 is shown below:

Cumulative
since	Year to	Year to
28 January 2016	31 December	31 December
to 31 December 2023	2023	2022
%	%	%
NAV per share (total return)	93.7	36.3	(19.1)
Share price (total return)	77.9	28.5	(16.3)
Benchmark (total return)	73.9	7.9	0.3

Investment policy and results

The Directors regard the Company's share price total return to be the overall measure of performance over the long term, since it approximates the return in the hands of shareholders. It combines the change in the share price with the dividends paid to shareholders, which are added back as though reinvested at the ex-dividend date.

The Directors regard the Company's NAV per share total return to be a key indicator of the Investment Manager's performance. The NAV per share total return is the change in the Company's NAV per share with distributions to shareholders added back.

Continued

The Board monitors these against the Company's benchmark and peer investment companies.

The Company's performance under both of these total return measures was strong in 2023.

Ongoing charges (KPI c)

Ongoing charges represent the costs that shareholders can reasonably expect the Company to pay from one year to the next under normal circumstances, excluding performance fees and taxation.

Phoenix does not earn an ongoing annual management fee, but instead is paid an annual performance fee, only if the benchmark is outperformed, equal to one third of the outperformance of the Company's NAV against its FTSE All-Share Index (total return) benchmark.

The Board monitors the Company's other operating costs carefully and aims to maintain a sensible balance between good quality services and costs. Based on the Company's average net assets for the year ended 31 December 2023, the Company's ongoing charges figure calculated in accordance with the Association of Investment Companies ("AIC") methodology was 0.45% (2022: 0.45%). As the size of the Company grows the ongoing charge figure, is expected to reduce.

Premium/Discount to NAV (KPI d)

The discount of the price at which the Company's shares trade to the NAV per share is considered a key indicator of performance as it impacts the share price total return and can provide an indication of how investors view the Company's performance and its investment objective. Accordingly, it is closely monitored by the Board as discussed in the Chair's Statement on page 5. The share price closed at a 10.0% discount to the NAV per share as at 31 December 2023 (2022: 4.4% discount). During the course of the year, based on the daily published NAVs per share (which are not adjusted to comply with IFRS 2 (see pages 10 and 60), the Company's shares traded at a discount of between 5.0% and 14.1%, with an average discount of 10.4% (2022: the Company's shares traded between a premium of 1.6% and a discount of 13.6% to NAV per share, with an average discount of 5.4%). Discount is further discussed on pages 5 and 38.

Revenue Result and Dividend

The Company's revenue after tax for the year ended 31 December 2023 was £2,661,000 (2022: £2,263,000). The Board is recommending the payment of a final dividend of 3.45p per share (2022: 2.97p per share). This dividend, if approved by shareholders, will be paid on 20 June 2024 to shareholders on the register as at 10 May 2024; the shares will be marked ex-dividend on 9 May 2024. In accordance with IFRS, this dividend is not reflected in the financial statements for the year ended 31 December 2023.